Confessions of Judgment: What Are They and Why Should You Care
What is a Confession of Judgment
A confession of judgment is a pleading filed in the Court of Common Pleas of Pennsylvania that gives the Plaintiff an immediate judgment against the Defendant without prior notice and an opportunity to be heard in court by the Defendant.
Who Uses Confessions of Judgment
Confessions of Judgment are primarily used by commercial lenders and commercial landlords. They cannot be used by consumer lenders or residential landlords.
What Makes Confessions of Judgment Different
The reason commercial lenders and commercial landlords favor a confession of judgment over having to file a complaint is that as soon as they file it they immediately obtain a judgment which creates a lien on any real estate owned by the defendant-borrower or tenant in that county. It does not have to be served like a complaint and they do not have to wait thirty (30) days after it is served before they can take a judgment. Normally a creditor must file a complaint, have it served on the defendant, give the defendant twenty (20) days to respond, if they don’t respond in twenty (20) days, send them a warning that a default judgment will be taken if no response is filed in ten (10) days, and only if they don’t respond can they then take a judgment. A confession of judgment bypasses all those steps.
The requirements for filing a confession of judgment are that there must be written authority to file the confession of judgment signed by the defendant-borrower or tenant. It must deal with a business transaction, generally a commercial loan or commercial lease rather than a consumer loan or a residential lease. If there is a contingency before the confession is authorized that contingency must be set forth in the complaint about the confession of judgment. Examples of contingencies that are often in confessions of judgment are the requirement of a ten-day notice to the borrower or tenant and an opportunity to cure. Most have a requirement that the defendant-borrower or tenant be in default of the note or lease before the filing of the confession of judgment. There are other requirements set forth in the Pennsylvania Rules of Civil Procedure for confessions of judgment.
There is often an acceleration clause in the note or lease allowing the lender or landlord to accelerate the entire balance due and owing under the loan or lease which can be included in the confession of judgment even though only one payment under the note or lease may have been missed.
How Do You Defend A Confession of Judgment
A defendant-borrower or tenant must file a petition to open or strike the judgment setting forth the defenses they have within thirty (30) days of receiving a notice to do so by the plaintiff. The defendant may file a petition to strike the judgment where there is a defect on the face of the record. For example, if the note or lease clearly requires a ten-day default notice to be sent and the lender or landlord has not pled that this provision was complied with prior to filing the confession of judgment then that would be grounds to have the judgment stricken. If the note or lease requires that the defendant is in default of the note or lease prior to the confession of judgment being filed and the plaintiff has failed to allege that the borrower or tenant is in default in the complaint confessing judgment, then that is grounds to have the judgment stricken. If the person that signed the note or lease has died, a confession of judgment may not be filed against their estate. The authority to file the confession of judgment terminated when the signor died. A judgment may not be confessed against a guarantor on a note or lease if the guarantor did not sign a document authorizing a confession of judgment against the guarantor.
A petition to open a confessed judgment may also be filed which raises facts not obvious from the face of the complaint. A judgment will be opened if the defendant presents sufficient evidence that in a jury trial would require the issues to be submitted to the jury. Facts sufficient to open the judgment would be that there is actually no default under the note or lease. It would also be grounds to open the judgment if the amount of the judgment does not give credits for all payments made. If the defendant did not sign the document upon which the confession of judgment was filed it would be grounds to have it opened. If the signor died before the confession of judgment was filed or was incompetent at the time the confession of judgment was signed it would be grounds to have it opened.
Execution Upon The Confessed Judgment
A plaintiff-lender or landlord must give the defendant notice of his intent to execute on the judgment and sell defendant’s real estate, personal property or levy on their bank accounts either prior to or with the execution on the confession of judgment. The defendant then has thirty (30) days to file the petition to open or strike the confessed judgment before any sheriff’s sale or finalization of a levy can take place. Failure to file the petition within thirty (30) days waives the defendant’s right to do so and the plaintiff may proceed with the execution and sell the defendant’s assets. Therefore, it is imperative that anyone having a confession of judgment filed against them retain counsel immediately to defend their rights.
Michael’s personal practice supports the needs of businesses and homeowners in a changing economic environment. He has extensive experience in mortgage foreclosures, collections and loan workouts, general counsel work and real estate litigation. Michael has been with MacElree Harvey, Ltd. since 1980.
If you have any questions regarding a banking and finance litigation matter, contact Michael Louis at [email protected] or (610) 840-0228.